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As part of our ongoing series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the world’s most iconic technology companies, Apple Inc. (AAPL).
 

Profile

Apple Inc. (AAPL) is a global leader in consumer electronics, software, and services. Its ecosystem of products — including the iPhone, iPad, Mac, Apple Watch, and AirPods — is complemented by fast-growing segments like Services (App Store, Apple Music, iCloud) and Wearables. Apple’s brand power, customer loyalty, and integrated hardware-software model contribute to a durable economic moat. With a history of strong free cash flow generation and an aggressive capital return strategy, Apple remains a favorite among long-term investors.
 

DCF Analysis

Inputs

• Discount Rate: 8.0%
• Terminal Growth Rate: 2.5%
• WACC: 7.5%

Forecasted Free Cash Flows (FCFs) in billions

Total Present Value of FCFs = 506.98 billion

Terminal Value Calculation

Using the perpetuity growth model:

Terminal Value = (142 × 1.025) / (0.08 – 0.025)
Terminal Value = 145.55 / 0.055 = 2,646.36 billion

Present Value of Terminal Value

PV of Terminal Value = 2,646.36 / (1.08^5)
PV of Terminal Value = 2,646.36 / 1.4693 = 1,801.23 billion

Enterprise Value Calculation

Enterprise Value = PV of FCFs + PV of Terminal Value
Enterprise Value = 506.98 + 1,801.23 = 2,308.21 billion

Net Debt Calculation

Net Debt = Debt – Cash
Net Debt = 106.63 – 65.17 = 41.46 billion

Equity Value Calculation

Equity Value = Enterprise Value – Net Debt
Equity Value = 2,308.21 – 41.46 = 2,266.75 billion

Per-Share DCF Value

Shares Outstanding = 15.12 billion
Per-Share DCF Value = 2,266.75 / 15.12 = $149.89
 

Conclusion

• DCF Value: $149.89
• Current Price: $200.42
• Margin of Safety: -33.6%

Based on our DCF valuation, Apple appears to be trading above its intrinsic value. The estimated DCF value of $149.89 is notably below the current share price of $200.42, implying a negative margin of safety of 33.6%.

While Apple’s capital efficiency, brand power, and cash-generating capabilities remain impressive, investors must weigh whether today’s valuation fully prices in its growth trajectory — or stretches expectations a bit too far.

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